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A complete guide on how to invest as a teenager? Make your future secure! (2023)

Are you a teenager curious about investing? Do you want to learn the tips and tricks or dos and don’ts of investing? Are you looking for a full guide on how to invest solely for teenagers like you? Or are you a responsible parent looking for ways to make your children’s future financially secure by teaching them how to invest at an early age? If yes, you’re at the right place, we will be teaching you everything you need to know about investing as a teenager and the steps you should take along the way. 

So, if you’re looking to invest, but you’re not eligible for it yet, worry not! We’ve got you! We will be explaining everything you need to know in complete detail, so make sure you don’t miss anything and read everything accordingly, pay attention to each detail so you don’t miss out on anything important, and so ultimately, you get every concept that we will be sharing with you here.  

We will not only be teaching you ways to invest your money as a teenager but also your time, because you’ve got plenty of time on your hands right now but not money. On the other hand, adults don’t have much time, but they do have money. This is why we will also be sharing the most productive ways of spending your time and the most important things you need to indulge in as a teenager, so without any further ado, let’s begin.  

A basic Intro to stocks  

So first up is the introduction to stocks. think of them as a piece that represents ownership of a fraction of the company that is selling the stock. So, for example, if a company has 1000 outstanding shares and you own 100 shares, that means you own 10% of the company. And the same example, if you were to own only 10 shares, that would mean you own 1% of the company’s assets. So, companies sell stocks to raise money for their business operations. There are a lot of companies out there that are not public. They don’t have enough stocks that are available on the stock market. But the ones that you probably are familiar with are public and they likely have shares trading in the general stock market. So, in a nutshell, there’s two ways that you guys can make money by buying and holding stocks.  

Method 1: Dividends: 

The first is through dividend income, here’s an example, if a stock is worth $20 and it pays out an annual dividend of $1.00, that means that their dividend yield is going to be 5%. So, you might be wondering why companies would want to give out different payments. Well, it will be eight percent of corporate profits to qualified shareholders. That’s their reward to shareholders for holding their stock. Some companies have been historically famous for giving out thousands of dollars in dividends to their holders which is why if you have enough stock this can eventually turn into a reliable source of income as you build up your portfolio.  

Method 2: Capital appreciation: 

Now what’s capital appreciation? This is a rise in a stock’s price and to make money there’s going to be some type of difference between your purchase price and the selling price of that stock. There are more sellers than there are buyers thus, the stock prices will go down. If there are more buyers than sellers, then that means that the stock price is going to go up. Usually, if there’s good news for a company, for example, they earn A lot more than expected revenues, that increases the number of people trying to buy the stock, which does mean that the price should go up. 

How much should you save?  

As we get older, we get more and more money, but we have less and less time and the responsibility on our shoulders increases as we age. However, one should know how money works from an early age which is why we’re going to go over the top five ways to invest your money that you should do as a teenager. When you grow up It’s going to be a big percentage of your monthly income. However, you shouldn’t always go to save, you should have fun for instance your friends are doing a bunch of fun things like hanging out, going to the cinema, or going on cool experiences, going backpacking. There’s lots of stuff you could do with that money.

Now the reason why we shouldn’t save too much as teenagers is because as we get older our earning power is only going to go higher and higher. You would have added to your Bank of experiences just generally for a happier life. So really when you’re a teenager, it’s important to keep in mind that the best thing you can do for your future self is not really to save that money, but it is to spend that money on cool experiences that you can then look back on in your memory bank. 

Open an investment account: 

So having said that, point number two is that you should probably try and open an investment account. That’s basically like a savings account, if you want more of a primer about why and how you should be investing in the stock market now. For example, in countries like the US, you do have to be over 18 to invest in the stock market as an individual. And so, what you need to do is ask your parents, your guardian or whoever to open some kind of investment account for you or custodial joint accounts. It’s going to vary depending on which country you’re in.  

Now, the point of opening one of these investment accounts when you’re a teenager is not that you’re plowing all your savings into it so that your stock market money can go up. Really the whole point of opening an investing account is so that you know what the process is like of putting money into stocks and shares. There are so many people who are in their late 20s making good money but have never invested in the stock market because it’s always seemed like a mental barrier. it seems hard and if they started doing it at a younger age, they will understand the process and get familiar with it, even putting $5 in here and there. So that’s really the point of doing this when you’re young rather than thinking the point is to make loads of money overtime. 

Invest in index funds rather than separate companies: 

So, once you’ve got your investment account, now you want to invest some small amount of money in index funds. Essentially when you buy an index fund, it’s going to compound over time and make millions further down the line but that depends on how much money you’re willing to invest, you know it will compound and that is a good thing. But it’s negligible compared to the amount of money you are going to be putting into investments as you start earning real money. But the whole point is that it just gets you familiar with the experience.

It gets you into that investor mindset of when you have spare cash thinking, you can invest it into the S&P 500, you can invest it into an index fund and not think anything of it. Whereas if you wait until you’re 25 to do that, it’s going to be a big mental and emotional hurdle. So, you should get over that hurdle when you’re A teenager.  

Invest on yourself: 

You can go to libraries to get the books that are available completely for free. That’s amazing, because then you can read books about things like business and learning, entrepreneurship and then go down the road that serves you best according to your judgement which will be based on the knowledge you accumulated from those books. That will help you out further in life. If that’s the route you want to go by, investing some money into learning would generally be a good idea.  

Take advantage of Compound interest  

This universal rule is extremely important when it comes to investing and its “Interest on interest.” You should know by now that at the start the growth is relatively slow and flat. But as the years go on and on, the slope of your graph gets higher and higher and soon you are basically growing at an exponential pace. The reason for this exponential pace is because of that interest in the interest, there really is a snowball effect and this is why investing for the long term is so important. The necessity of making more and more money as soon as possible is to invest early. Once you invest your money the compound interest will take over and your graph will also be inclining at a good pace.  

Importance of investing early: 

Let’s now say that you get a 5% return on your money once you invest it, which means that that $100 grows into $105. Now for the second year, let’s say you also get another 5% growth. If you invest $105.00 this year, are you going to make another $5? Answer is no, because you had that extra $5 that you made the year before. After a second year, you’re going to be left with $110.25. That’s a very small amount over what we had before. The $5.25 is barely more than the $5, however this happened due to the phenomenon of Compound interest. 

Important things to know before investing: 

Now let’s talk about some of the very important things you should know, what really matters when it comes to investing. What matters is that you invest A small amount into safe stock and what does not matter is the right time in the market for the perfect time to buy a stock. You should not try doing that. Research has shown again and again that it is impossible to time the market, even though you may think you are smart. You probably cannot do it because you need to time the bottom of the market.

You need to time the top the top of the market along with it and timing both of them is an exceptionally difficult task and even if you score it, you won’t feel that it’s worth everything you put into it. Plus, most of the gains in the market over the long term come on single days and you know, guessing those days. It’s just pretty much impossible. Another thing that does not matter is trying to trade and flip stocks all the time. Day trading is beneficial for many people, but it’s also not beneficial and makes them lose money for more people. They’ve got pretty much a guarantee to win the stock market. Then I don’t suggest doing that.  

Pros and cons of custodial accounts: 

Now here’s some pros and cons of having a custodial account. The pros are: 

  • You’ll likely have 24/7 customer support for your account depending on what platform you’re on. It’s generally going to be a lot helpful for tax rates, since you are likely making less money and  
  • It allows you, the miners, to take advantage of compound interest fully. 

Now of course there are some cons: 

  • so having a custodial account with money inside of it can reduce your financial aid eligibility or any other government aid.  
  • Any deposits are irreversible,  
  • and the beneficiary account cannot be altered.  

Active investing & passive investing approaches: 

If You want to take an active investing approach. You’ll need to know that you have to do a lot of research. its recommended to invest at least one hour in any company that you want to buy, and you’ll need to learn how to look for value in stocks through ratios, financial statements, history and all that stuff. When it comes to passive investing, the research you’re doing is not nearly as difficult as in active investing.

You’ll be investing more in safe long-term mutual funds, index funds, and ETF. Essentially, the main strategy here is dollar cost averaging DCA. This is when you’re putting a small amount into your investments over time, consistently for a long time. For example, putting in $50 per week into an S&P 500 index fund, something like that. You can start actively investing by researching on the best return providing companies throughout history, you’ll have to research them separately and then invest in any one of them, however when it comes to passive investing S&P 500 makes it much easier for you to get started.   

How to get started as a teenager 

Now let’s talk about how to get started with investing. So if you’re under the age of 18, you’re going to have to have your parents open up a custodial account for you. You can do this on platforms that provide the best services in your country or your region. all the reputable platforms. Do your research before investing into anything. And of course, we recommend that you buy and hold safe long term securities like S&P 500. And if you’re 18 or older, you can open up your own brokerage account which we will be explaining down below.  

Information required to open a custodial account: 

So to open a custodial account your parents are going to need the following things: 

  • your Social Security number,  
  • driver’s license number,  
  • employers name and address,  
  • contact info,  
  • birthday and Social Security number of the minor,  
  • and then also statement information for funds you may want to transfer.  

If you’re a parent reading this, you’re going to really want to start encouraging and educating your kids to start investing at an early age. Teaching the basics, help guide them along and open a custodial account for them as early as possible to make their future financially secure.  

Brokerage account: 

if you are 18 or older, we recommend opening a brokerage account to buy and sell stocks. Preferably one that is very easy to access on your phone. This account gives you more control and you don’t need anyone else like your guardians or your parents to open it. All you need is your personal information and you’ll be done in no time. With this account you will be able to invest according to your liking and you can use it without any restrictions.  

Alternative investments: 

There are also alternative investments that you can buy for example, crypto, real estate and so much more but as a teenager the best thing you guys can do for yourself is to start developing high value skills and acquiring education and mentorship. Take those skills, build your own service-based business and drastically increase your income that way. This will make you way more money than investing in stocks right now. The choice is upto you now, you can invest in yourself and set yourself up for becoming a wealthy individual in the upcoming times of inflation, or you can also invest in stocks and save up to invest more and more until you become rich.  

However, what not many people will open your mind to is you can even do both. You can save and earn at the same time which is what most people want to do but they refrain from doing so simply because of a mental barrier of which they have become a victim now. Invest as much as you like in stocks or real estate but also invest in yourself. That is where you’ll get the absolute highest ROI (return on investment) possible so make sure you take steps while also staying conscious about the responsibility of teaching yourself along the way.  

How to invest your efforts & time as a teen 

you can go to libraries to get interesting books, and they have books available completely for free. That you can just read whenever you want. You can read books about things like business and learning and entrepreneurship and all those interesting yet informative topics that will help you out further in life. If that’s the route you want to go by, investing some money into learning would generally be a good idea.  

Let’s discuss different things you can invest your time into when you’re young. When you’re young, you generally have a lot of free time and not much money. So really investing money is like a bit of a side hustle. Investing time is really where you can make decisions that move the needle for your future life. 

Build a fast-lane mindset: 

Anytime someone is promising you a path or a course or anything to get rich easy, they are trying to scam you because there is nothing to that. There is no easy way to get rich. But there are quicker ways to get richer than others, which generally involve building a business. So you can read books, you can educate yourself about the idea, act on it and kind of start thinking instead of the slow approach of getting a good job, going to university, and then retiring at 65.  

Pick up skills: 

Learning to code is still one of the best skills that you can have. You can always learn to code without books because they will help you in understanding the theoretical basis of coding but they wont help much with the practical approach towards it, you can always watch videos on youtube, take free courses about the skills you’re interested in and this will take you to your goals ultimately as learning something new or getting a new skill and mastering it can change the course of your life.  

Document your journey and use it as content: 

Another Tip for investing your time as a teenager is to document your learning and there are all sorts of different platforms where you can document stuff through writing, but this is good for two reasons.  

 . The craft of making content: 

it helps build the craft of writing, and being able to communicate well through written language is also an incredibly valuable skill that makes you ridiculously valuable in the job market. That also makes anything that you start any business that you do, more likely to succeed, because now you’re able to communicate whether its copy writing for your brand Is a huge competitive advantage.  

. Memories and a new skill set: 

It’s nice to look back upon. All of those, learnings, experiences, and memories will be lost in the void of your brain unless you use it responsibly, you can always start a blog and share your experiences from time to time, you can record videos of your progress in a project and gather an audience.

So, documenting your journey is good for your own experiences and memory collection, people would be interested in reading about the stuff that you’re sharing, especially if it’s about documenting your journey through entrepreneurship or through learning cool things, or anything like that. So that was the world of writing. But if you’re interested in potentially making videos, maybe starting a YouTube channel, doing a TikTok, or maybe posting stuff on Instagram.  

learn about video production: 

Again, this is one of those ridiculously valuable skills that all companies are now looking for. Every startup is trying to do some kind of content marketing play, and so if you can educate yourself around cameras, how to use a camera. How to talk to a camera, potentially, how to edit videos, stuff like that.

You again have a massive competitive advantage if you are looking for one of these jobs in in the future, or also if you’re trying to promote your own thing which you might want to do at some point further down the line then video production is going to come in handy, you don’t only need to learn the art of editing and uploading your videos but also selling your art in exchange for some value. You should know how to market your client’s services or your own product in the coming future so you will have to learn the social media aspect of video production as well, simply because you might need it in the future.  

Become money literate: 

And let’s now move on to tip number 5, which is to become money literate. You should always be educating more and more about how our financial system, or our economic system operates, you should know the answers to basic questions like, how does money operate? What is inflation? And how to lower inflation rates in a said country?

Theoretical answers of course, and It’s not just books, if for whatever reason you are unable to read, there are also loads of YouTube channels to consume information about money in a really nice way. You can find different articles on the internet that will give you detailed information about money and how to make more money with money, so make sure you do the research required to fill your mind with intelligent thoughts about your state’s economic and financial system.  

How to invest your time by being productive!  

As teenagers, you have a lot more time than adults but a lot less money, now let’s talk about how to balance it all out so you have enough money and enough time as well. But to reach that level you’re going to have to invest your time along with your money. Let’s now discuss “How to invest your time” And so a pro tip here is to get some job or gain some kind of work experience. This is helpful. Generally, getting a real job or some work experience or a part time job makes you some amount of money.  

Let’s say that you admire an author, or a YouTuber, or anyone influential for that matter. If there is a way that you can create something for that person, maybe you take one of their videos and turn it into a tweet thread. Maybe you take one of their TikTok’s and you turn it into an infographic poster. that helps you develop your own skills in using Photoshop, doing graphic design in writing and all these other skills that are quite useful to be. It also helps you develop the skills in a kind of fun way because now you have a tangible output and you’re potentially

helping someone and seeing it might even get you noticed by that person. Creating something for them and improving your own skills while you’re at it will potentially get you into their network as part of their network and if you make it public, you will have content for their audience as well, which will be appreciated by both, the person and his audience.  

Conclusion: 

We discussed the most important aspects of being a teenager, and still having time on your hands, unlike most adults that work full-time jobs from 9-5. And the aspects included not only investing your money as teenager and getting familiar with the process but also investing your time, which holds much more significance than investing your money, which you already have very little of, so little that it won’t make much of a difference to your older self if you invest it the right way, save it, or spend it.

The information about investing as a teenager included the steps required to open an account with the help of their guardians and we also shared information about the various investing related options you have as a teenager, so you know what you can and can’t do as a teenager because OfCourse there are always some limitations you need to put into perspective especially when you’re underage. We hope that you got the information that you’re looking for and we wish you the best of luck in investing and making your future financially secure.  

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